While trading in nifty future we can benefit from a simple thing known as discount / premium on future price compared to spot price. Now how to check if nifty future is trading at discount or premium, quite simple procedure; just compare nifty future with nifty spot:
1. If Nifty future is trading higher than nifty spot, then nifty future is trading with premium.
2. Second case, if nifty future trades lower than nifty spot level, then we conclude nifty future is trading with discount.
At this stage you have learnt to find if nifty future is trading at premium or discount. How to use it in actual trading here are points:
1. Premium shows near term demand and is more likely that nifty future will trade higher in coming sessions. Demand is sole reason for premium in futures trading. So when nifty future is quoting premium over nifty spot then, nifty is buying opportunity and more trade idea will be enter long position.
2. Discount is just opposite to premium; in case of discount, supply is higher than demand. It suggests nifty future is likely to correct soon. Trading idea is short sell nifty future when future quotes lower as compared to nifty spot.
Trader can go through historical charts of nifty future and nifty spot, when markets were in uptrend nifty future had huge premium, but at time of recession in 2008 nifty future entered bearish market and at that time we saw premium was changed to discount.
About Bhaveek PatelBhaveek Patel is one of the most successful traders, technical analyst, and investor, his areas of interest include stock market, forex, and gold trading. Apart from this, he is often seen in the golf course. He is having more than 10 years of experience in trading, had placed his first order on 19 June 2006 with IndiaInfoline.
Leave a Reply